Wednesday, December 12, 2012

San
Bernardino to Curb Payments on Retirees in Bankruptcy - (www.bloomberg.com) San Bernardino, the
second-largest U.S. city to seek bankruptcy protection, will put off paying
$13 million to California’s retirement system and $3.4
million for pension bonds issued in 2005, in a provisional spending plan. The
City Council voted 5-2 for the fiscal road map yesterday to meet a
court-imposed Nov. 30 deadline for a balanced interim municipal budget while in
bankruptcy proceedings. In addition to deferring payments on pension
obligations, the plan calls for firefighting and policing cuts. “Without
restructuring its finances or maintaining the protection of Chapter 9, the city
could not pay its employees, retirees, bondholders or vendors,” Andrea
Travis-Miller, the acting city manager, and Jason Simpson, the finance
director, said in a council memo. “This would result in uncontrolled default
and, presumably, a collapse of public services.”

Ousted Bell
police chief sues for severance pay - Los Angeles Times - (www.latimes.com) The police chief who was
ousted after it was revealed that he and other city leaders in Bell were
drawing enormous salaries has sued his former employers for severance pay. Randy
Adams, who is now one of the highest-paid public pensioners in California,
stopped working for the small, working-class city shortly after The Times
revealed the high salaries paid to the former chief, as well as to Chief
Administrative Officer Robert Rizzo and Angela Spaccia, Rizzo's assistant.

Merkel Did ‘Bare Minimum’ to Keep Greece Solvent: Analysts -
(www.cnbc.com) The latest Greek debt deal is at the behest of
German Chancellor Angela Merkel and the needs of the domestic political
landscape there rather than about ensuring Greece’s long term economic well-
being, analysts told CNBC Tuesday. “They’ve done the
bare minimum just to keep the show on the road to prevent Greece from falling
apart and having to leave the euro in the next few months. They’ve not done
enough to get Greece back to a sustainable economic or fiscal path,” Michael
Saunders, chief economist for Western Europe at Citi, told CNBC Europe’s
“Squawk Box”.

Cox and Archer: Why $16 Trillion Only Hints at the True U.S.
Debt - (online.wsj.com) As a result, fiscal policy
discussions generally focus on current-year budget deficits, the accumulated
national debt, and the relationships between these two items and gross domestic
product. We most often hear about the alarming $15.96 trillion national debt
(more than 100% of GDP), and the 2012 budget deficit of $1.1 trillion (6.97% of
GDP). As dangerous as those numbers are, they do not begin to tell the story of
the federal government's true liabilities. The actual
liabilities of the federal government—including Social Security, Medicare, and
federal employees' future retirement benefits—already exceed $86.8 trillion, or
550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of
Medicare and Social Security was $7 trillion. Nothing like that figure is used
in calculating the deficit. In reality, the reported budget deficit is less
than one-fifth of the more accurate figure.

Buenos
Aires and holders of Argentine restructured bonds filed separate motions on
Monday, arguing that New York's reputation as a financial centre was at stake.
Argentina is trying to escape a Catch 22 ruling on an "equal footing"
clause that has triggered fears of a fresh default 11 years after the country
defaulted on $100bn in foreign debt. Last week, New York Judge Thomas Griesa
ordered Argentina to pay $1.3bn to a group of plaintiffs led by the fund NML
Capital, part of Elliott Associates, by December 15, the same day it is due to
make a payment to bondholders who exchanged their defaulted debt. That sets the
stage for Argentina either to pay everyone or no one, as it would not be able
to continue paying its restructured bonds without flouting Judge Griesa's
order. The country is not expected to choose the former option, given the
government's stated intention not to pay a dime to what it describes as
"vultures".